The Saudi government’s decision to sell part of its stake in the country’s largest lender in an initial public offering is expected to result in one of the Middle East’s biggest share sales. It will also be the country’s first bank IPO since 2008.

Finance Minister Ibrahim Al Assaf told the state news agency on Thursday that the Public Investment Fund is planning to sell a 15% stake in Jeddah-based National Commercial Bank (NCB). The minister said they will seek approval for the IPO from the market regulator in the third quarter of this year. The state-run investment fund, which owns a majority of the bank, also plans to allocate an additional 10% stake to the Public Pension Agency, he said.

Chairman Mansoor Al Maiman told local media that the bank will start the due diligence process as of today and they expect to select advisers for the IPO to work on the bank’s financial and legal issues within this quarter. Three hundred million shares will be offered to Saudi citizens in the IPO, he said.

Saudi Arabia is the region’s largest economy, but it still doesn’t allow direct foreign investment in its stock market. That’s expected to change, as we noted last December, but it remains unclear exactly when due to the political ramifications of such a decision within the kingdom.

“If the NCB IPO does extremely well, it will be a positive signal that the market might be opened soon,” analyst Abdullah Mohiuddin of Riyadh-based Manafea Holding Co. told The Wall Street Journal over the phone. He added that this could happen by the end of the year.

Analyst Waleed Al Abdulhadi wrote in daily Al Jazirah that he expects the NCB IPO to have a good effect on the market similar to the IPO of the Saudi Telecom Co. over 10 years ago.

“History will probably repeat itself and bring another competitive and historic event,” he said. “In 2003 we had the biggest IPO that market has ever seen then, and it was the beginning of a boom that no one predicted.”

Economists say the STC IPO has encouraged hundreds of thousands of Saudis to invest in the stock market until it crashed in 2006, wiping out roughly $500 billion in value. The Capital Market Authority has worked over the last few years to fix regulatory problems in order to avoid another bubble, they said, so the atmosphere is upbeat even if some issues remain.

“The offering is positive and its timing is good too,” popular business columnist Rashid Al Fowzan wrote today, “in a period of increasing economic growth and an abundance of high liquidity.”

Al Fowzan said he hopes that the NCB IPO will open the appetite of the state and the Public Investment Fund for more IPOs.